Segment Information

12 Months Ended

Dec. 31, 2022

Segment Information

Segment Information

16. Segment Information

The Company operates under the following four operating segments: Real Estate, Mortgage, Marketing Funds, and Other. Mortgage does not meet the quantitative significance test; however, management has chosen to report results for the segment as it believes it will be a key driver of the Company’s future success. Management evaluates the operating results of its segments based upon revenue and adjusted earnings before interest, the provision for income taxes, depreciation and amortization and other non-cash and non-recurring cash charges or other items (“Adjusted EBITDA”). The Company’s presentation of Adjusted EBITDA may not be comparable to similar measures used by other companies. Except for the adjustments identified below in arriving at Adjusted EBITDA, the accounting policies of the reportable segments are the same as those described in Note 2, Summary of Significant Accounting Policies.

The following table presents revenue from external customers by segment (in thousands):

	Year Ended
	December 31,
	2022		2021		2020
Continuing franchise fees	$	123,272	$	110,613	$	84,863
Annual dues		35,676		35,549		35,075
Broker fees		62,939		65,456		50,028
Franchise sales and other revenue		27,385		23,506		20,826
Total Real Estate		249,272		235,124		190,792
Continuing franchise fees		10,117		7,891		5,354
Franchise sales and other revenue		2,271		2,160		1,256
Total Mortgage		12,388		10,051		6,610
Marketing Funds fees		90,319		82,391		64,402
Other		1,407		2,135		4,197
Total revenue	$	353,386	$	329,701	$	266,001

The following table presents a reconciliation of Adjusted EBITDA by segment to income (loss) before provision for income taxes (in thousands):

	Year Ended
	December 31,
	2022		2021		2020
Adjusted EBITDA: Real Estate	$	128,301	$	125,153	$	96,079
Adjusted EBITDA: Mortgage		(6,368)		(5,321)		(2,255)
Adjusted EBITDA: Other		(301)		(249)		(1,266)
Adjusted EBITDA: Consolidated		121,632		119,583		92,558
Loss on contract settlement (a)		—		(40,900)		—
Loss on extinguishment of debt (b)		—		(264)		—
Impairment charge - leased assets (c)		(6,248)		—		(7,902)
Impairment charge - goodwill (d)		(7,100)		(5,123)		—
Loss on lease termination (e)		(2,460)		—		—
Equity-based compensation expense		(22,044)		(34,298)		(16,267)
Acquisition-related expense (f)		(1,859)		(17,422)		(2,375)
Fair value adjustments to contingent consideration (g)		133		(309)		(814)
Restructuring charges (h)		(8,690)		—		—
Other		(24)		(968)		(503)
Interest income		1,460		217		340
Interest expense		(20,903)		(11,344)		(9,223)
Depreciation and amortization		(35,769)		(31,333)		(26,106)
Income (loss) before provision for income taxes	$	18,128	$	(22,161)	$	29,708

(a) Represents the effective settlement of the pre-existing master franchise agreements with INTEGRA that was recognized with the acquisition. See Note 6, Acquisitions and Dispositions for additional information.

(b) The loss was recognized in connection with the amended and restated Senior Secured Credit Facility. See Note 10, Debt for additional information.

(c) Represents the impairment recognized on portions of the Company’s corporate headquarters office building. See Note 3, Leases for additional information.

(d) During the fourth quarter of 2022, in connection with the restructuring of the business and technology offerings, the Company made the decision to wind down the Gadberry Group, resulting in an impairment charge to the Gadberry Group reporting unit goodwill. In addition, during 2021, lower than expected adoption rates of the First technology resulted in downward revisions to long-term forecasts, resulting in an impairment charge to the First reporting unit goodwill. See Note 8, Intangible Assets and Goodwill for additional information.

(e) During the second quarter of 2022, a loss was recognized in connection with the termination of the booj office lease. See Note 3, Leases for additional information.

(f) Acquisition-related expense includes personnel, legal, accounting, advisory and consulting fees incurred in connection with acquisition activities and integration of acquired companies.

(g) Fair value adjustments to contingent consideration include amounts recognized for changes in the estimated fair value of the contingent consideration liabilities. See Note 11, Fair Value Measurements for additional information.

(h) During the second half of 2022, the Company incurred expenses related to the restructuring of the business and technology offerings, including $7.6 million of severance and related expenses and a $1.2 million write off of capitalized software development costs. See Note 2, Summary of Significant Accounting Policies for additional information.

The following table presents total assets of the Company’s segments (in thousands):

	As of December 31,
	2022		2021
Real Estate	$	588,216	$	674,034
Marketing Funds		64,755		63,313
Mortgage		42,143		38,359
Other		120		427
Total assets	$	695,234	$	776,133

Virtually all long-lived assets are within the United States.